Mrf tyres-Analysis of balance sheet and Ratio statement

Page 1

Subject: Financial Management.

Topic: Analysis of balance sheet and

Ratio statement.

Project Submitted By: Project Submitted To:

Name: Zil Shah Prof.Afrin.R

Class: E-MBA

Roll No: 81

Page 2

INDEX

Sr. no particulars Page no.

1 Company profile -

MRF

4

2 Profit and loss account

6

3 Balance sheet 8

4 Ratio analysis 9

5 Conclusion 13

6 Bibliography 16

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ACKNOWLEDGEMENT

I would like to thank all those who have directly or

indirectly helped me in completing this project

report. I would like to thank Prof.Afrin.R for

giving me this project and also for her continuous

guidance which helped me to successfully do the

project.

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COMPANY PROFILE

The MRF story is a truly remarkable one. What started as a

rubber balloon factory with a funding of Rs.14, 000 way back

in the 40’s is now a multibillion legacy that produces quality

tyres used all around India & internationally along with a

presence in paints & coats, toys, motorsports and cricket

training.

MRF’s origin traces back to the humble shack in Madras that

housed its first makeshift toy balloon manufacturing unit set

up by KM Mammen Mappillai in 1946. It was not until 1952

when it changed course and turned to tread rubber

manufacturing. Thus began its glorious reign as the undisputed

leader in the tyre making industry.

By the early 60’s, MRF was exporting its quality tyres to

offices overseas in the U.S. & Beirut and soon made its

presence known globally across 65 different countries - with

tyres rolling out of 6 interdependent facilities built across 450

acres, 3000 strong dealer networks and 180 different offices

MRF is recognized for its drive towards continuous quality

improvement and customer satisfaction. It has won the JD

Power award not once but 10 times till date. It has also won

the TNS and CAPEXIL awards for being voted as the most

trusted tyre company in India.

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MRF’s passion for motorsports is seen through its

involvement in racing, karting, rallying and various other

motorsport events. Its rallying team has won the prestigious

FIA Asia Pacific Rally Championship twice and even in

international championships, MRF karting tyres homologated

by FIA, is the preferred choice.

MRF Ltd sells its products in the replacement/retail market

only through authorized dealers to ensure genuine products

and the best after sale service to the customers. The internet

sites or web based sites (on-line sellers) are not authorized by

MRF Ltd to sell and to

make any representation

for and on behalf of MRF

Ltd and its products.

Hence MRF Ltd may not

honor any unauthorized

claims, warranty,

representations made by

any unauthorized retailers

including on-line sellers

on MRF products.

MRF shares a passion for

quality tyres and fast cars

just as it does for quality

cricket and fast bowlers. It has chosen to associate itself with

some of the world’s best fast bowlers through ‘Pace

Foundation’ - An academy that has trained legends such as

Irfan Pathan, Munaf Patel, RP Singh, Bret Lee, Shoaib Akhtar,

Glenn McGrath and many more.

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Profit and loss account of MRF

Profit & Loss account of MRF Rs. (In cr) Rs. (In cr)

Sep '14 Sep '13

12 months 12 months

Income

Sales Turnover 13,197.58 12,131.16

Excise Duty 0.00 0.00

Net Sales 13,197.58 12,131.16

Other Income 65.62 29.03

Stock Adjustments -19.18 26.73

Total Income 13,244.02 12,186.92

Expenditure

Raw Materials 8,635.06 8,137.76

Power & Fuel Cost 664.67 600.11

Employee Cost 732.69 603.49

Other Manufacturing Expenses 0.00 0.00

Selling and Admin Expenses 0.00 0.00

Miscellaneous Expenses 1,218.04 1,049.89

Preoperative Exp Capitalised 0.00 0.00

Total Expenses 11,250.46 10,391.25

Sep '14 Sep '13

Operating Profit 1,927.94 1,766.64

PBDIT 1,993.56 1,795.67

Interest 231.58 195.94

PBDT 1,761.98 1,599.73

Depreciation 423.09 372.93

Other Written Off 0.00 0.00

Profit Before Tax 1,338.89 1,226.80

Extra-ordinary items 0.00 0.00

PBT (Post Extra-ord Items) 1,338.89 1,226.80

Tax 441.00 424.59

Reported Net Profit 897.89 802.21

Minority Interest 0.01 0.01

Share Of P/L Of Associates 0.00 0.00

Net P/L After Minority Interest & Share Of Associates

908.32 808.60

Total Value Addition 2,615.40 2,253.49

Preference Dividend 0.00 0.00

Equity Dividend 21.20 12.72

Corporate Dividend Tax 4.19 2.15

Per share data (annualised)

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Shares in issue (lakhs) 42.41 42.41

Earning Per Share (Rs) 2,117.09 1,891.49

Equity Dividend (%) 500.00 300.00

Book Value (Rs) 10,651.94 8,594.71

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Balance sheet of MRF

Balancesheet of MRF Rs. (In cr) Rs. (In cr)

Sep '14 Sep '13

12 months 12 months

Sources Of Funds

Total Share Capital 4.24 4.24

Equity Share Capital 4.24 4.24

Share Application Money 0.00 0.00

Preference Share Capital 0.00 0.00

Init. Contribution Settler 0.00 0.00

Preference Share Application Money 0.00 0.00

Employee Stock Option 0.00 0.00

Reserves 4,513.40 3,640.90

Networth 4,517.64 3,645.14

Secured Loans 1,390.87 1,259.92

Unsecured Loans 424.13 168.77

Total Debt 1,815.00 1,428.69


Policy Holders Funds 0.00 0.00

Group Share in Joint Venture 0.00 0.00

Total Liabilities 6,332.64 5,073.83

Sep '14 Sep '13

12 months 12 months

Application Of Funds

Gross Block 6,309.76 5,459.38

Less: Revaluation Reserves 0.00 0.00

Less: Accum. Depreciation 2,881.07 2,489.84

Net Block 3,428.69 2,969.54

Capital Work in Progress 626.67 359.12

Investments 1,087.91 906.16

Inventories 1,799.70 1,795.29

Sundry Debtors 1,708.47 1,556.14

Cash and Bank Balance 707.67 330.81

Total Current Assets 4,215.84 3,682.24

Loans and Advances 437.85 340.28

Fixed Deposits 0.00 0.00

Total CA, Loans & Advances 4,653.69 4,022.52

Deferred Credit 0.00 0.00

Current Liabilities 3,059.16 2,839.20

Provisions 405.16 344.31

Total CL & Provisions 3,464.32 3,183.51

Net Current Assets 1,189.37 839.01


Group Share in Joint Venture 0.00 0.00

Miscellaneous Expenses 0.00 0.00

Total Assets 6,332.64 5,073.83

Contingent Liabilities 2,563.95 1,646.12

Book Value (Rs) 10,651.94 8,594.71

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RATIO ANALYSIS

Liquidity ratio:

Current ratio = Current Assets/Current Liabilities

2014 2013 comparison

4215.84 3039.16

3682.24 2839.20

1.38 1.29 0.09

Quick ratio = (Current Assets – Inventory)

Current Liabilities

2014 2013 Comparison

4215.84-1799.70 3039.16

3682.24-1795.29 2839.20

0.79 0.66 0.13

Solvency ratio:

Debt-equity ratio = Total Debt/Total Equity


1815.00 4526.12

1428.69 4.24

0.40 0.39 0.01

Interest coverage ratio = EBIT/Interest


1570.47 231.58

1422.74 195.94

6.78 7.26 (0.48)

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Profitability Ratios:

Net profit margin = Gross Profit × 100 / Total Revenue


897.89×100 13197.58

802.21×100 12131.16

6.76 6.61 0.15

Gross profit margin = Gross profit x 100

Net sales


1504.52×100 13197.58

1392.65×100 12131.16

11.40 11.48 (0.080)

Return on asset = Net Income/ Average Total Assets


897.89×100

13197.58

802.21×100

12131.16

6.80 6.61 0.19

Return on equity = Net Income/ Average Total Equity


897.89×100

4.24

802.21×100

4.24

21176.65 18920.04 2256.61

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Return on investment = Net Income/ Average investment


897.89×100 4.24

802.21×100 4.24

21176.65 18920.04 2256.61

Return on capital employed

(ROCE) = Net profit after taxes + interest x 100

Capital employed


897.89+231.58×100 6,332.64

802.21+195.94×100 5,073.83

17.83 19.67 (1.84)

Turnover ratio

Inventory turnover ratio = COGS / Average Inventory


13,197.58-1,927.94 1,797.49

12,131.16 -1,766.64 1720.62

6.26 6.02 0.24

Creditor turnover ratio = Credit sales

Average Debtors & bill receivables


13,197.58-1,927.94 1,797.49

12,131.16 -1,766.64 1720.62

6.26 6.02 0.24

*assuming credit sales = sales

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DuPont Analysis:

Two-level Analysis:

ROE= Net income × Average assets

Average assets Average equity

Three-level Analysis:

ROE= Net income × Revenue × Average assets

Revenue Average assets Average equity

Five-level:


897.89 4.24

802.21 4.24

211.76 189.20 22.56

http://cfatutor.files.wordpress.com/2013/07/5level.png

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CONCLUSION

There is no change in share capital. Reserves and surplus have

decreased then previous year. Secured loan are less than

compared to previous year. Unsecured loan has decreased than

previous year. There has been sale of fixed asset in current

year. There is decrease in debtors. Dividend paid form 12 to

21 this year.

Current ratio is the ratio of current liabilities and current

assets. A current ratio measure the ability of the firm to meet

its current liabilities. It indicates the rupee of current assets

available for each rupee of current liability. As shows in the

table above the current ratio of MRF Ltd is 1.38 :1 at the end

of last financial year as against 1.29:1 of previous year. It

shows the company has kept the current assets level optimally.

It has positive impact on the profitability.

The quick ratio indicates the relation of quick assets with

current liabilities. The table above indicates the quick ratio if

MRF Ltd. is 0.79:1 as against 0.66:1. It means the company

has enough liquid assets to meet short term liabilities. The

short term liquidity position of the concern is satisfactory.

The debt-equity ratio indicates the proportion of borrowed

capital to the net worth. A very high ratio is unfavourable

from firm’s point of view. The above table shows the debt

equity ratio of MRF Ltd. is 0.40:1 and 0.39:1 on the previous

year. It indicates that the company is not much relied on

borrowed capital to finance its activities It raises the

creditworthiness of the company and it further strengthen the

liquidity position of the company

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Gross profit margin is also known as gross margin. It is

calculated by dividing gross profit by sales. Gross profit is the

result of the relation between prices, sales volume and costs.

There is substantial decrease in the gross profit ration of MRF

Ltd in the last two years. It was 11.48% in Sept. 2013 which is

raised to 11.40% in Sept. 2014.

The ratio of net profits to sales essentially the cost price

effectiveness of the operation. The ratio of net profit margin of

MRF Ltd. was 6.76% at the end of last financial year as

against 6.51% in the previous year.

RETURN ON ASSETS Return on the asset is another

indicator of the company’s profitability. It shows how

efficiently the management has used the assets of the

company. ROA of MRF Ltd was 6.80% at the end of last

financial year as against 6.61% in the previous year.

RETURN ON CAPITAL EMPLOYED ROCE indicates how

much return/ profits the company earned on the capital

employedA higher ROCE indicates more efficient use of

capita. ROCE of MRF Ltd. is 17.83% at the end of last

financial year.

INVENTORY TURNOVER RATIO This ratio indicates the

efficiency of the firm in producing and selling its products. It

is calculated by dividing the cost of goods sold by the average

inventory. Inventory turnover ratio of MRF Ltd. is 6.26:1 at

the end of Sept.2013 as compared to 6.02:1 in the previous

year.

MRF tyre is a leading brand in the tyre industry in India. The

financial position of MRF Ltd. is sound. The liquidity

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position, short term solvency position and profitability is

satisfactory. The progress made by the company during the

last 10 years is exceptionally well. The company is growing

speedily. Recently MRF won the silver award and is the only

Indian company to win this excellence award.

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Bibliography

http://www.mrftyres.com/

http://www.moneycontrol.com/india/stockpric

equote/tyres/mrf/MRF

http://www.investopedia.com/

Business

Mrf tyres-Analysis of balance sheet and Ratio statement